The next generation SIM (Subscriber Identification Module) technology, eSIM, has for several years hovered on the cusp of becoming the de facto replacement for traditional SIM cards. Adopted by both Google Pixel phones in 2017 and iPhones in 2018, it seemed just a matter of time before the rest of the (Android) smartphone industry adopted eSIM.

But beyond Google and Apple smartphones, eSIM has not taken off. There are several key reasons for this: 1. China, the world's single largest smartphone market, has not adopted eSIM for smartphones, with even Apple offering a China variant of its latest iPhones that removes the eSIM module; 2. Mobile operators in many parts of the world are not enthusiast about a technology that they worry could promote churn; 3. Smartphone vendors are cautious about adopting a technology that would possibly go unused due to reasons 1 & 2.

There remains very good reasons to adopt eSIM. From a consumer perspective it makes provisioning a phone an easy process. From a vendor point-of-view it frees up critical real estate inside the smartphone that can be used for other components. It's also one less slot that needs to be in the device, improving its structural rigidity and removing a point of ingress for moisture and dust. And for other devices, such as smartwatches and IoT the eSIM is an essential and cost saving technology for devices which are growing ever smaller.

eSIM will soldier on in smartphones. In 2020 nearly 1 in 10 smartphones sold will come equipped with an eSIM. However, until key Android smartphone vendors like Samsung and Huawei adopt eSIM, the majority of smartphones sold will continue to use traditional SIM technology.

Strategy Analytics' Device Technology practice examines the eSIM market for smartphones and forecasts sales for these through 2020. Clients of our Device Technologies practice can access that research here.